WORLD TRADE  
ORGANIZATION  G/SCM/Q4/DMA/6 
16 October 2006 
 
 (06-4969) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
PROCEDURES FOR EXTENSIONS UNDER  
ARTICLE 27.4 OF THE AGREEMENT ON SUBSIDIES  
AND COUNTERVAILING MEASURES 
 
Replies to Questions Posed by CANADA1;  COLOMBIA2; 
JAPAN3;  PERU4 and the UNITED STATES5 
 
 
 The following communication, dated 12 October 2006, is being circulated at the request of the Delegation of Dominica. 
 
_______________ 
 
 CANADA
 
 
Q1. Recalling that the objective of G/SCM/39 was to provide an extension of the transition 
period for the progressive elimination of export subsidy programmes of a number of Members, as called for in Article 27.4 of the SCM Agreement, we would ask the proponents of G/SCM/W/535 and G/SCM/W/537 to inform the Committee on Subsidies and Countervailing 
Measures of the individual efforts, if any, they  have undertaken to gradually bring these export 
subsidy programmes into conformity with their WTO obligations.  
  
Reply
 
  Dominica is of the view that document G/SC M/39 contains only a fast-track procedure to 
approve extensions under Article 27.4 of the AS CM. This document neither reduces nor does it 
increase the balance of rights and obligations und er the ASCM.  Therefore, neither document 
G/SCM/39 nor Article 27.4 of the ASCM provide for a progressive elimination of export subsidy 
programmes.   
 Moreover, Article 27.4 mentions a "progressive" elimination in the first sentence which refers 
to the phase out of the export subsidies within th e eight-year period mentioned in Article 27.2(b), a 
condition that is completely different to those regarding the subsidies programmes at issue.  
Additionally, it is clear from the language in Article  27.4 that such "progressive elimination" is not 
mandatory. In consequence, Dominica does not see an y obligation to take a ny effort for gradually 
phasing out these export subsidy programmes.  
 
                                                     
 
1 G/SCM/Q4/DMA/2 
2 G/SCM/Q4/DMA/1 
3 G/SCM/Q4/DMA/4 
4 G/SCM/Q4/DMA/5 
5 G/SCM/Q4/DMA/3/Rev.1 G/SCM/Q4/DMA/6 
Page 2  
 
   In addition, Dominica considers that its e xport subsidy programmes are fully in compliance 
with its WTO obligations. As a matter of fact, the current extensions have been granted to Dominica 
in accordance to Article 27.4 and under the pr ocedures and conditions set forth in document 
G/SCM/39.  
 Nevertheless, Dominica has been undertaki ng efforts to phase out its export subsidies 
programmes. Only one company has benefited fro m the programme since 2001.  The particular 
incentives have not been granted to other enterprises since that time. 
 Q2. Could the proponents of both documents al so explain how further extension of this 
phase-out period would ensure that these efforts a re finally successfully undertaken in order to 
avoid a similar situation at the end of any ne w extended phase-out period for certain export 
subsidy programmes?     
  
Reply
 
 
 The proposal contained in G/SCM/W/535 refers only to the amendment of paragraph 1(e) of 
G/SCM/39. The view of the proponents is to conti nue benefiting from the extension throughout 2018, 
based on their special economic, financial and de velopment needs.  Therefore, the rights and 
obligations contained in document G/SCM/39 an d Article 27.4 of the ASCM would remain 
unchanged 
 
 Consequently, Dominica would take a prudent d ecision, based on specific financial, economic 
and development needs and in accordance with th e procedures and timelines established in the 
provisions mentioned above.  As a WTO Member, Dominica has designed its development strategies 
to address these needs with a view to utilize trade promotion as a tool for poverty reduction and to 
achieve a fruitful integration into the world ec onomy. However, these goals could only be achieved 
with the full support and solidarity of the entire WTO Membership.   
Q3. Recalling that the previous extension of the phase-out period for certain export subsidy 
programmes was for an additional period of 6 years, could the proponents of both documents explain the rationale for a proposed extension of 11 years?   
 
Reply
 
  The choice of the suggested date of 2018 should  be read in the light of the discussions that 
had taken place before the adoption of G/SCM/39.  At  that time, the proponents of this document had 
already explained their concerns and the reasons  to eliminate their programmes over a long enough 
timeframe, possibly extending over 20 years. In the light of those discussions and taking into account the relevant and legitimate financ ial, economic and development n eeds of Dominica, the extension 
proposed in G/SCM/W/535 should be rega rded as an appropriate extension.  
  G/SCM/Q4/DMA/6 
 Page 3 
 
 
  COLOMBIA  
 
Q1. In the case of each of the programmes, please provide the most up-to-date information 
available regarding the number of beneficiary en terprises classified according to industrial 
sector. 
 
Reply  
  Currently, only one enterprise benefits fro m income tax credits on export profits.  The 
company produces dental creams, soap, de tergents and household disinfectants. 
 
Q2. Please explain why, under the above progra mmes, which have been in place for over 
ten years, it is still not possible to dismantle the prohibited subsidies.  
Reply
 
 
 The Fiscal Incentives Programme is a key component of Dominica's investment promotion framework and efforts to diversify its economy
6.   
  It should be noted that currently only one en terprise benefits from income tax credits on 
export profits and the range of products manufactured and exported by that company is also limited to 
soap and other surface active agents and dental cream .  The importance of the credits granted to that 
enterprise to the financial, economic and developm ent needs of Dominica is very important. The 
provision of the export subsidy and other fiscal incentives under the programme to that enterprise 
constitutes a major deciding factor in the continuati on of what is a significant level of investment, 
export earnings and employment generation to th e economy of Dominica.  The products benefiting 
from the incentives constitute almost US$18.5 million or  44% of Dominica's total exports.  Close to 
300 persons are employed.  Total investment of the company in Dominica currently stands at 
EC$60 million (US$22m).  By global standards these figures are very small.  But they are very significant for a small vulnerable economy like Dominica.  The loss of those incentives to the Company could therefore pose a serious threat the w ithdrawal of the investment in Dominica.  This 
would result in serious loss of export earnings, national income and employment to Dominica. 
 
 Furthermore the subsidy provided by Dominica cannot under any circumstances be considered as trade distorting at the multilateral leve l.  Exports of soap, dental cream and detergents 
from Dominica would constitute a very, very small fr action of a percent of world exports of these 
products. 
 
Q3. The basis for requesting the extension is th at Dominica is a small, vulnerable economy 
which suffers from the combined effect of diseconomies of scale caused by the small size of its economy and administration and by its physical isol ation.  If the above distorting factors are not 
brought under control before 2018, would there be a request for a new extension for the phasing 
out of the prohibited subsidies?  Please explai n why these characteristics of Dominica's economy 
prevent the country from complying fully an d satisfactorily with WTO export subsidy 
disciplines.  
Reply
 
 
 At this time, it is not anticipated that beyond 2018 there would be need for a further extension 
of the phasing out period.  A de termination would be made base d on the need and the prevailing 
                                                      
6 See G/SCM/N/74/DMA G/SCM/Q4/DMA/6 
Page 4  
 
  provisions of the WTO SCM Agreement on granting extensions.  Nonetheless there are plans to 
reform the fiscal incentive programme at  the national level and regional level. 
  Also please see answer provided in 2 above
. 
 Q4. Please explain why the situation giving ri se to the request for extension requires the 
granting of prohibited subsidies until the year 2018, rather than an earlier date. 
 
Reply
 
 
 The choice of the suggested date of 2018 should  be read in the light of the discussions that 
had taken place before the adoption of G/SCM/39.  At  that time, the proponents of this document had 
already explained their concerns and the reasons  to eliminate their programmes over a long enough 
timeframe, possibly extending over 20 years. In the light of those discussions and taking into account the relevant and legitimate financ ial, economic and development n eeds of Dominica, the extension 
proposed in G/SCM/W/535 should be rega rded as an appropriate extension.  
  Also see answer given in 2 above
.  G/SCM/Q4/DMA/6 
 Page 5 
 
 
  JAPAN  
 
Q1. Please show the reasons why the lengthy exte nsion of 11 years is indispensable uniformly 
for all the export subsidy programmes referred to in the above documents. 
 Reply
 
  The choice of the suggested date of 2018 should be understood in light of the discussions that 
had taken place in 2000/2001 and led to the adoption of G/SCM/39 (the decision that allowed for the 
current extension). At that time, the proponents of  this G/SCM/39 had expressed concern with respect 
a short extension would not allow time for the n ecessary structural transformation needed to wean 
industry off government subsidies. Specifically, it was suggested that a timeframe of sufficient 
duration, and adequate to allow time for sectoral and macro-economic adjustment was required. In this context, the proponents offered that 20 years w ould be adequate. In light of those discussions and 
taking into account the legitimate fiscal, economic and development needs of Dominica, the extension 
proposed in G/SCM/W/535 should be rega rded as an appropriate extension.  
  It should be noted that all of Dominica's programmes generally share the same objectives, 
structure and design. Similarly, the economic impe ratives that necessitate such intervention, prevail 
almost uniformly in the economies of other proponents of G/SCM/W/535, hence, the rationale of a uniform timeframe is supported by the similarities that exists be tween programmes and the intended 
policy effects they aim at. Moreover, all proponent s face the same structural weaknesses which justify 
the proposed extension.    Finally, in this regard, it must be acknowledge d that Dominica, like the other proponents of 
G/SCM/W/535, have suffered the adverse impacts of multiple external shocks. These shocks have 
setback the realisation of policy outcomes, desire d and contemplated in G/SCM/39. The combined 
effects of multiple natural disasters, externalities resultant from September 2001, as they relate to 
tourist arrivals, and the doubling of the world mark et price for oil have all conspired against the 
fulsome insertion of Dominica and the other proponents into the global economy.   Dominica has applied and notified only one pr ogramme. This programmes has been the one 
of the core of Dominica's export development stra tegy and, notwithstanding the fact that the 
performance of the these programmes fall short of exp ectation; it would be desirable to maintain these 
programmes so as to enhance a more diverse export base and to use as a tool to lift people out of poverty. For these reasons, it is indispensable to have a uniform extensi on for the export subsidy 
programmes.  
 
 More critically, Dominica is currently r ecovering from the aftermath of an economic 
and financial meltdown which t ook place in 2001-2002 when output contracted by 10 per cent. The 
2001-2002 crisis originated in the expansionary fiscal policies of the pr eceding decade, when the 
authorities sought to prop-up activities by increasing pub lic spending. By 2001, this approach reached 
its limits and the government faced a liquidity cris is. Coupled with the adverse effect of a severe 
drought and September 2001, the results was a steep recession.
7 It is critical that while, in the case of 
Dominica, only one instrument is available, it is impor tant to ensure that all avenues are left open to 
this small and vulnerable economy to strengthen th e prospect of economic recovery and stave off 
further economic difficulties.   
 
                                                     
 
7 IMF 2005 Article IV Consultation http://www.i mf.org/external/pubs/f t/scr/2005/cr05384.pdf G/SCM/Q4/DMA/6 
Page 6  
 
  Q2. Please explain, one by one for each of th e export subsidy programmes referred to in the 
above documents, how each of those export subs idy programs are integrated in the development 
strategies of the relevant Me mber, why a further extension beyond 2007 is necessary for its 
economic and financial needs, and why the extens ion period has to be through to the end of 
2018. 
 
Reply
 
  The Fiscal Incentives Programme is a key component of Dominica's investment promotion framework and efforts to diversify its economy
8.   
 
 It should be noted that currently only one en terprise benefits from income tax credits on 
export profits and the range of products manufactured and exported by that company is also limited to 
soap and other surface active agents and dental cream .  The importance of the credits granted to that 
enterprise to the financial, economic and developm ent needs of Dominica is very important. The 
provision of the export subsidy and other fiscal incentives under the programme to that enterprise 
constitutes a major deciding factor in the continuati on of what is a significant level of investment, 
export earnings and employment generation to the economy of Dominica.  The products benefiting 
from the incentives constitute almost US$18.5 million or 44% of Dominica's total exports.   Close 
to 300 persons are employed.   Total investment of the company in Dominica currently stands at 
EC$60 million (US$22m).  By global standards these figures are very small.  But they are very 
significant for a small vulnerable economy like Dominica.  The loss of those incentives to the 
Company could therefore pose a serious threat the w ithdrawal of the investment in Dominica.  This 
would result in serious loss of export earnings, national income and employment to Dominica.   Furthermore the subsidy provided by Dominica cannot under any circumstances be 
considered as trade distorting at the multilateral leve l.  Exports of soap, dental cream and detergents 
from Dominica would constitute a very, very small fr action of a percent of world exports of these 
products.   The choice of the suggested date of 2018 should  be read in the light of the discussions that 
had taken place before the adoption of G/SCM/39.  At  that time, the proponents of this document had 
already explained their concerns and the reasons  to eliminate their programmes over a long enough 
timeframe, possibly extending over 20 years. In the light of those discussions and taking into account the relevant and legitimate financ ial, economic and development n eeds of Dominica, the extension 
proposed in G/SCM/W/535 should be rega rded as an appropriate extension.  
 
                                                     
 
8 See G/SCM/N/74/DMA  G/SCM/Q4/DMA/6 
 Page 7 
 
 
  PERU  
 
Q1. Do the co-sponsors of proposal G/SCM/W/535 intend to extend only the programmes 
which have been notified to date under Ar ticle 27.4 of the Agreement on Subsidies and 
Countervailing Measures and which are included in Annex A of their proposal or do they 
intend to include any other export subsidy progr amme which fulfils the criteria set forth under 
Article 2 in document G/SCM/39? 
 
Reply  
 
 The proposal contained in G/SCM/W/535 a nd G/SCM/W/535/Add.1 refers only to the 
amendment of paragraph 1(e) of G/SCM/39.  Ther efore, the intention of the sponsors of these 
documents is to continue benefiting from the ex tension until the end of 2018 and the conditions 
specified in G/SCM/39 would remain unchanged.  Th is clearly excludes the possibility to include any 
further programmes. 
  
Q2. Under what laws and enabling regulations are the programmes listed in Annex A of the 
proposal implemented?  
Reply
 
 
 The Fiscal Incentives Act Chap. 84:51 of the Revised Laws of Dominica . 
 
Q3. Which sectors and products benefit from the programmes? 
 
Reply  
 
 Currently only one enterprise producing 's urface active' agents (soap, detergents, 
disinfectants) and toothpastes benefit from the export subsidy.  
Q4. What amount is disbursed by the St ate to the programmes listed in Annex A? 
 
Reply
 
  Government intervention in support of domestic  industry largely takes the form of revenue 
forgone.  G/SCM/Q4/DMA/6 
Page 8  
 
  UNITED STATES
 
 
Q1. Please describe what efforts Dominica ha s made to phase out the programme within the 
extension period that has already been gr anted, as provided under the "Procedures for 
Extension Under Article 27.4 for Certain Developing Country Members."9  Please further 
describe how Dominica will continue to ensure th at the programme will be phased out, if an 
additional extension were granted.   
 
Reply  
 
 Only one company has benefited from the progr amme since 2001.  The particular incentives 
have not been granted to other enterprises since that time.  
Q2. Please describe changes to the programme since 2001.  Also, please provide any updated 
or revised implementing legislation, and an y relevant amendments, unde r this programme and 
any accompanying regulations and decrees.    
Reply
 
  There have been no changes to the programme since 2001.  Q3. How many beneficiaries of this pr ogramme were there in 2001?  How many 
beneficiaries are there currently under the prog ramme?  What types of industries currently 
benefit under the programme? 
 
 Currently, only one enterprise benefits fro m income tax credits on export profits.  The 
company produces dental creams, soap, de tergents and household disinfectants. 
 
Q4. Did Dominica undertake any commitments  to provide export subsidies to new 
beneficiaries beyond the year 2009?  If so, please indicate the number of such beneficiaries by 
the year in which those commitments extend. 
 Reply
 
  No.  
Q5. If available, please provide the amount of the subsidy provided under the programme 
for each year from 2001 through 2005.    
                                                     
 
9 G/SCM/39  G/SCM/Q4/DMA/6 
 Page 9 
 
 
  Reply  
  Please refer to the table below.  
Please note, the quantities referred to below refer only to revenue foregone
 
 
Year Tax Credits 
Granted on 
Export 
Profits 
EC$'000 Production 
EC$'000 Export of 
Subsidized 
Products 
EC$'000 Imports of 
Subsidized 
Products 
EC$'000 Total 
Exports 
EC$'000 Total 
imports 
EC$'000 
1996 635 N/A 53,847 4,224 138,537 358,683 
1997 444 N/A 53,327 4,100 141,258 363,292 
1998 833 59,184 72,494 1,337 167,453 356,992 
1999 568 41,684 64,683 2,138 150,448 373,215 
2000 432 36,818 63,845 2,104 144,673 400,952 
2001 61 33,399 55,256 2,365 118,026 355,022 
2002 160 32,125 49,258 1,722 115,192 314,048 
2003 213 17,771 54,292 2,077 108,002 345,449 
2004 274 39,468 52,646 2,640 111,749 392,031 
2005 813 40,408 50,255 2,349 112,813 446,435 
  
Q6. Please explain whether exports by qualif ying companies to CARICOM members are 
eligible for the benefits provided under this progra mme.  If not, please explain what benefits, if 
any, such exports to CARICOM countries are elig ible for, and the reason for differentiating 
among exports to CARICOM members and other exports.    
Reply
 
  Exports to CARICOM Member States are eligib le for benefits provide d under the programme 
according to section 18 of the Fiscal Incentives Act. 
 
Q7. Please explain whether there are any requirements that the receipt of benefits is 
contingent upon the use of domestic over imported goods.   
 
Reply
 
 
 The receipt of benefits is not contingent  upon the use of domestic over imported goods. 
  
__________